Washington, DC — U.S. Reps. Brad Miller (NC-13) and Mel Watt (NC-12) and House Financial Services Committee Ranking Member Barney Frank (MA-4) have introduced anti-predatory lending legislation that eliminates specific abusive lending practices and ensures that credit for home ownership is available for consumers with impaired credit.

 

Introduced this week, the Prohibit Predatory Lending Act of 2005 (H.R. 1182) is based on the State of North Carolina's predatory lending statute, which is widely considered the model state statute for preventing abusive lending while preserving access to credit.

 

"Predatory lending" encompasses a wide range of abusive practices engaged in by lenders who take advantage of uninformed borrowers. Such practices include charging fees and rates that are not reflective of the risk, not informing borrowers of less expensive loan alternatives and not disclosing terms and options of products and services offered with a loan.

 

"This bill protects vulnerable consumers without cutting off credit for lower income borrowers," Miller said. "It's time that all American consumers have the protection that North Carolina consumers now have."

 

With anti-predatory lending legislation likely to be considered by the House Financial Services Committee this year, the bill's sponsors hope the core protections in their bill will serve as a baseline for Committee debate.

 

“Given the assertion by the Comptroller of the Currency that national banks do not have to follow state lending laws, it is important for us to provide rules at the federal level," Frank said.  "I believe the North Carolina and Massachusetts statutes are good models to follow for this purpose.”

 

Since the North Carolina law was enacted, the state has seen a dramatic reduction in abusive or predatory subprime lending and refinancing. A recent study conducted at the University of North Carolina at Chapel Hill found that after the passage of North Carolina legislation, "there was a reduction of loans with predatory terms without a restriction in access to or increase in the cost of loans to borrowers" with imperfect credit.

 

Reps. Miller and Watt said that when the North Carolina law was drafted, lawmakers involved banks, mortgage bankers and brokers, consumer organizations, non-profit organizations and credit unions in reaching a consensus on the best ways to fight abusive lending practices.

 

Rep. Watt stated, “North Carolina’s approach in crafting its law ensured the creation of the best possible law and, consequently, North Carolina is now the acknowledged leader in addressing predatory lending. The federal government should follow North Carolina’s example and guarantee that borrowers in every state have the same protections as the citizens of North Carolina.”